Gemstone Equity Research & Advisory Services

Saturday, March 4, 2017

MARKET TREND FOR MONDAY, FEBRUARY 27, 2017

MARKET TREND FOR MONDAY, FEBRUARY 27, 2017

The Indian Equities had a volatile session on Thursday as the benchmark NIFTY50 ended with minor gains of 12.60 points or 0.14% after witnessing a typically rollover dominated and induced volatility in the session. Today, the Markets are likely to see a tepid and modestly negative start as it would begin the week while being in overbought territory and also being very near to a major pattern area resistance in form of a Double Top on the Close Charts. Without disputing the fact that the undercurrent still predominantly continues to remain buoyant, we see all the possibilities of some sharp and volatile corrective activities taking place and the behavior of the Markets vis-à-vis the 8960-9000 zones will remain immensely important.

For today, 8975 and 9005 will act as immediate resistance levels for the Markets. The supports come in lower at 8865 and 8810 levels.

The Relative Strength Index – RSI on the Weekly Chart is 74.9121 and it do not show any failure swings. However, the NIFTY has continued to set a fresh 14-period high while the RSI has not and this has resulted into Bearish Divergence. Further, this trades in overbought territory as well. The Daily MACD is bullish post reporting a positive crossover and it trades above its signal line. No significant formation on Candles is observed.

The pattern analysis clearly shows the NIFTY approaching one of its major pattern resistances. The level of 8948-8950 zones is a major pattern area resistance for the NIFTY in form of a Double Top. Even with the bullish underlying intentions, there are all the chances that the Markets see some temporarily halt to the up move and see itself once again into some consolidation. Some profit taking bouts from higher levels and some range bound consolidation cannot be ruled out.

Overall, we expect the NIFTY to once again face some broad ranged consolidation. This will keep the sessions in coming days relatively more volatile. At the same time, we also see such expected consolidations and corrective activities help the Markets gather further impetus for possible up move again. Given the underlying buoyant structure on the Charts, we very strongly recommend to refrain from creating major short positions. Every corrective dip is likely to offer opportunities for select stock picking. With volatility expected to rule the roost, positive caution is advised for the day.

Milan Vaishnav, CMT

Technical Analyst

(Research Analyst, SEBI Reg. No. INH000003341)

Member:

Market Technicians Association, (MTA), USA

Canadian Society of Technical Analysts, (CSTA), CANADA

www.EquityResearch.asia

http://milan-vaishnav.blogspot.com

+91-98250-16331

milan.vaishnav@equityresearch.asia

milanvaishnav@yahoo.com

WEEKLY MARKET OUTLOOK FOR FEBRUARY 27 THRU MARCH 03, 2017

WEEKLY MARKET OUTLOOK FOR FEBRUARY 27 THRU MARCH 03, 2017

The Markets on Thursday saw sharp volatility especially in the second half of the session which was much because of the expiry led rollovers. With the short week that came to an end on Thursday, the NIFTY posted decent gains of 117.80 points or 1.34% on Weekly basis. This Week also remained highly eventful as the NIFTY posted fresh 52-week highs while it also approached key resistance area. On the top of it it formed some interesting patterns as well. In the Week that went by, NIFTY continued to advance to its logical expected targets of 9000-mark as it posted its Weekly high of 8982.15. In this short week, the Markets has ensured that we see the coming next week remaining as eventful and volatile as the previous week. On Monday, we see a tepid start to the Markets and some modestly negative opening will be expected. The 8968-9000 zones will remain key resistance area for the immediate short term. We can see some corrective activities persisting and this will also lead to some existance of sharp volatility in the Markets.

For the coming week, the levels of 8990 aand 9195 will be the broad resistance area for the Markets. The supports will be seen coming around 8845 and 8750 levels.

The Relative Strength Index – RSI on the Weekly Chart is 65.8732 and it has reached its highest value in last 14-periods which is Bullish. It does not show any bullish or bearish divergence as against the price. The Weekly MACD remains bullish as it trades above its signal line. No major formations have been observed on Candles.

The pattern analysis presents very interesting picture. It is quite evident and beyond doubts that the NIFTY on the Daily Chart is overbought and has approached its key pattern resistance in form of a Double Top. However, moving back to the Weekly Charts, the patterns presents a relatively bullish picture. To begin with, on the Weekly Charts as well the NIFTY has approached its major pattern resistance area of 8960-9000 zones. It has made a Double Top formation spanning over nearly eight months. However, if this pattern is viewed on a larger note, it has made a Potential Inverse Head and Shoulder formation. It is extremely important to note that this is a not-so-classice but quite Complex Inverted Head and Shoulders formation which requires validation over coming days. In the immeidate short term, we just cannot rule out Markets resisting to the 9000-mark while it consoldiates in a broad range are are likely to result into intermittant volatile profit taking bouts.

Overall, even if the Weekly Charts show some more room to move up, the serious pattern area resistance on the Weekly Charts and the overbought nature of the Markets on the Daily Charts are all likely to prevent any runaway rise in the Markets. There is a frenzied chase by liquidity but the current structure of the markets will certainly infuse great amount of volatility in the coming week. We should be ready to brace and tackle sharp volatile movements on either side in the coming week while remaining highly stock-specific in the Markets.

A study of Relative Rotation Graphs – RRG clearly show IT Pack has been steadily losing momentum on week-on-week basis. Though it remained highly volatile on account of buy-back news and even if it remains volatile on daily basis, on a Weekly note it is likely to lose momentum. The REALTY and FMCG pack will see relative outperformance coming in with some contribution from SMALL CAP pack as well. Despite some stock-specific out performance, the METAL and ENERGY pack will continue to show weakening momentum as compared to NIFTY. Underperformance from PHARMA is likely to persist. Some attempts to consolidate and score on relative outperformance will be seen from AUTO Pack in the coming week.

Important Note: RRG™ charts show you the relative strength and momentum for a group of stocks. In the above Chart, they show relative performance as against NIFTY Index and should not be used directly as buy or sell signals.

(Milan Vaishnav, CMT, is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)